MARKET DEVELOPMENT
Plantations Retained at Neutral by CIMB Research
Plantations Retained at Neutral by CIMB Research
16/03/2015 (The Star) - CIMB Equities Research expressed surprised by Indonesia’s plan to raise the country’s biodiesel blend from 10% to 15% as early as next week.
It said on Monday this is a positive development for crude palm oil (CPO) prices if the mandate is successfully executed as it would boost demand for palm oil.
The research house estimated that this policy could potentially raise CPO demand for domestic biodiesel usage in Indonesia by 322% to 4.8 million tonnes per annum (or 16% of the country’s total output).
“However, there are three key challenges, namely: (1) the economic viability of biodiesel versus crude oil; (2) the lack of enforcement; and (3) infrastructure and logistical issues.
“Until we see more concrete steps taken to achieve this biodiesel mandate, we will keep our average 2015 CPO price forecast at RM2,460 per tonne. Our Neutral sector call is maintained,” said CIMB Research.
It said on Monday this is a positive development for crude palm oil (CPO) prices if the mandate is successfully executed as it would boost demand for palm oil.
The research house estimated that this policy could potentially raise CPO demand for domestic biodiesel usage in Indonesia by 322% to 4.8 million tonnes per annum (or 16% of the country’s total output).
“However, there are three key challenges, namely: (1) the economic viability of biodiesel versus crude oil; (2) the lack of enforcement; and (3) infrastructure and logistical issues.
“Until we see more concrete steps taken to achieve this biodiesel mandate, we will keep our average 2015 CPO price forecast at RM2,460 per tonne. Our Neutral sector call is maintained,” said CIMB Research.